NEW YORK, NY – Private equity's transformation of the life insurance and annuities industry has reached a tipping point. PE firms now control or influence $849 billion in life insurer assets—representing 14% of total life insurance industry balance sheets—through private credit investments, according to Federal Reserve research. Beyond lending, PE firms own major insurers outright, drive industry M&A activity exceeding $75 billion in recent years, and fundamentally reshape how life insurers invest portfolios to generate returns for policyholders and shareholders.
This isn't a gradual shift—it's a revolution. What began with Apollo Global Management founding Athene (now the third-largest annuity issuer in the U.S.) in 2009 has evolved into wholesale industry transformation. Blackstone, KKR, Carlyle, Brookfield, and other PE giants have acquired or launched insurers, purchased life insurance portfolios worth tens of billions, and pioneered alternative investment strategies that promise higher returns than traditional bond-heavy approaches.
For consumers, the implications are profound. PE-owned insurers are the fastest-growing annuity providers, offering competitive rates that attract hundreds of billions in premiums annually. But this growth raises critical questions: Are alternative investment strategies—private credit, real estate, infrastructure, private equity itself—safe for guaranteed insurance products? Do PE ownership models prioritize policyholder interests or shareholder returns? How do regulators ensure solvency when insurers invest in illiquid, complex assets?
The answers matter to millions of Americans relying on life insurance death benefits and annuity income for financial security. As PE reshapes the industry, understanding the dynamics, risks, and opportunities is essential for anyone considering life insurance or annuities.
How Private Equity Entered Life Insurance
The Post-Financial Crisis Opportunity
The 2008-2009 financial crisis created the conditions for PE's life insurance entry:
Near-zero interest rates: The Federal Reserve slashed rates to near zero and kept them there for years. Life insurers, traditionally investing premiums in investment-grade bonds, faced a crisis: bond yields of 2-3% couldn't support guaranteed annuity payouts of 4-5%.
Profitability squeeze: Life insurers' business model depends on earning more on investments than they pay in claims and benefits. When investment yields fall below guaranteed product rates, insurers lose money.
Capital constraints: Many insurers emerged from the financial crisis with weakened capital positions, seeking to offload unprofitable or capital-intensive blocks of business (particularly older annuities with high guaranteed rates).
PE saw opportunity: While traditional insurers struggled with low-yield bonds, PE firms had expertise in alternative investments—private credit, real estate, infrastructure, and private equity—offering 6-10%+ returns. If they could deploy these strategies within insurance companies, they could profit from the yield spread.
Apollo and Athene: The Blueprint
2009: Apollo Global Management launched Athene, an insurance company designed from inception to leverage Apollo's alternative investment capabilities.
The model:
- Athene sells annuities with competitive guaranteed rates (attracting billions in premiums)
- Athene invests those premiums in Apollo-managed alternative investments (private credit, structured products, etc.) earning 6-8%+ returns
- Athene pays annuity guarantees of 4-5%, retaining 2-3%+ spread as profit
- Apollo earns asset management fees from managing Athene's investments
Success: Athene became the third-largest U.S. annuity issuer by 2020. In 2021, Apollo purchased the remaining stake in Athene it didn't already control for $11 billion, fully integrating the insurer into Apollo's operations.
Proof of concept: Apollo/Athene demonstrated that PE firms could profitably operate life insurers by deploying alternative investment strategies, generating superior returns vs. traditional insurers constrained by conservative investment mandates.
The M&A Wave
Following Apollo/Athene's success, PE firms pursued three strategies to enter life insurance:
1. Acquire existing insurers: Outright purchases of life insurance companies
Notable deals:
- Brookfield Reinsurance acquired American National (2022): $5.1 billion
- Blackstone-affiliated entities purchased Allstate's life insurance business (2021): $2.8 billion
- KKR and Global Atlantic Financial Group merger (2021): KKR's insurance platform
- Carlyle's Fortitude Re acquisitions: Multiple reinsurance deals
2. Acquire blocks of business: Purchasing in-force life insurance and annuity policies from traditional insurers seeking to shed capital-intensive liabilities
3. Launch new insurers: Starting insurance companies from scratch, similar to Apollo/Athene model
Total M&A volume exceeded $75 billion in the post-2020 period as PE aggressively expanded insurance footprints.
Private Credit Lending to Insurers
Beyond ownership, PE firms lend directly to life insurers through private placement markets:
$849 billion in private credit extended to life insurers as of 2024, representing 14% of industry assets.
How it works: PE firms originate loans to corporations, real estate projects, and other borrowers, then sell those loans (private placements) to life insurers seeking higher yields than public bonds offer.
Who benefits:
- PE firms: Earn origination fees and spreads on loan syndication
- Insurers: Achieve 80+ basis points higher yields vs. public bonds (6% vs. 5.2%, for example), improving profitability
Growth drivers: PE-owned insurers disproportionately purchase private credit from their parent PE firms, creating integrated ecosystems where PE firms earn fees on both sides (asset management and insurance operations).
How PE Ownership Changes Life Insurance Operations
Investment Strategy Transformation
Traditional life insurers invest conservatively: 70-80% investment-grade bonds (government and high-grade corporate), 10-15% stocks, 5-10% real estate/mortgages, <5% alternatives.
PE-owned insurers invest aggressively: 30-50% investment-grade bonds, 30-50% private credit/structured products, 10-20% private equity/real estate, 5-10% hedge funds/alternatives.
Example - Portfolio comparison:
Traditional insurer (Northwestern Mutual):
- 75% bonds (mostly investment-grade)
- 15% stocks
- 8% mortgages/real estate
- 2% other
PE-owned insurer (Athene):
- 40% investment-grade bonds
- 35% private credit/structured credit
- 15% commercial real estate/infrastructure
- 10% equity and alternatives
Impact: PE-owned insurers achieve higher investment returns (6-7% vs. 4-5%) but assume greater risks (illiquidity, complexity, credit risk).
Actuarial and Product Design
More competitive product pricing: Higher investment yields allow PE-owned insurers to offer more attractive annuity rates and life insurance premiums, driving market share growth.
Example: Fixed annuities from PE-owned insurers often credit 0.25-0.50% higher interest than traditional competitors, attracting billions in inflows.
Focus on fee-generating products: PE-owned insurers emphasize fixed indexed annuities and variable annuities with living benefit riders—products generating ongoing fees vs. simple term life insurance with minimal fees.
Capital Management and Leverage
PE firms optimize capital efficiency: Using reinsurance, derivatives, and financial engineering to minimize regulatory capital requirements while maximizing return on equity.
Reinsurance to affiliates: PE-owned insurers often cede (reinsure) risks to offshore or affiliated reinsurers in favorable regulatory jurisdictions (Bermuda, Cayman Islands), reducing capital held domestically.
Regulatory arbitrage: Structuring transactions to achieve accounting or regulatory advantages, sometimes raising supervisory concerns.
The Benefits PE Brings to Life Insurance
Innovation and Competition
Product innovation: PE-owned insurers introduce new product structures, distribution channels, and technology platforms, forcing traditional insurers to innovate.
Competitive pressure on pricing: PE-owned insurers' aggressive pricing benefits consumers by keeping annuity rates competitive and life insurance premiums reasonable.
Market liquidity: PE firms provide capital to acquire unwanted blocks of business from traditional insurers, improving industry capital efficiency and allowing traditional insurers to focus on their core strengths.
Capital Deployment Efficiency
Higher returns for policyholders: When PE-owned insurers earn 6-7% vs. 4-5%, they can offer better annuity rates, higher cash value growth in whole life policies, and more competitive premiums.
Expertise in complex assets: PE firms have deep expertise in private credit, real estate, infrastructure, and other alternatives—potentially better equipped to manage these assets than traditional insurers venturing into new territory.
Example: PE-owned insurer invests in infrastructure projects (toll roads, utilities, renewable energy) generating 7%+ returns with predictable cash flows matching long-term annuity liabilities. Traditional insurer sticks with 4% corporate bonds. PE-owned insurer delivers better value.
Industry Consolidation
Scale economies: Larger insurers achieved through PE-driven M&A realize efficiencies in administration, technology, compliance, and distribution.
Stabilization of distressed insurers: PE capital can stabilize insurers facing financial difficulty, preserving policyholders' benefits and preventing insolvencies.
The Risks and Concerns
Illiquidity Risk
Mismatch between assets and liabilities: Life insurance liabilities (death benefits, annuity payments) are liquid obligations. If policyholders surrender annuities en masse or life insurance death claims spike, insurers must pay cash immediately.
Private credit and alternatives are illiquid: Loans to private companies, real estate investments, and infrastructure projects cannot be quickly sold at full value. In a crisis, illiquid assets create liquidity problems.
Regulatory concern: If market stress causes policyholders to surrender en masse, can PE-owned insurers with 40-50% illiquid assets meet redemptions without fire-sale losses?
Historical precedent: Insurers with illiquid assets have faced severe stress during past crises (e.g., insurance company failures in 2008-2009 partially due to illiquid mortgage-backed securities and real estate holdings).
Credit and Default Risk
Private credit is riskier than investment-grade bonds: Private loans to middle-market companies, leveraged buyouts, and structured products carry higher default risk than AAA government bonds or AA corporate bonds.
Concentration risk: PE-owned insurers may have concentrated exposures to specific sectors, geographies, or PE sponsor relationships, creating correlated risk.
Example concern: PE-owned insurer lends heavily to companies owned by its parent PE firm's portfolio. If the PE firm's portfolio companies struggle (economic downturn, sector distress), the insurer faces correlated losses—multiple borrowers defaulting simultaneously.
Regulatory scrutiny: State insurance regulators examine PE-owned insurers' credit quality, concentrations, and related-party transactions to ensure safety and soundness.
Conflicts of Interest
Related-party transactions: When PE-owned insurers invest in loans originated by parent PE firms, conflicts arise:
- Fee conflicts: PE firm earns origination and management fees—incentivizing volume over quality
- Valuation conflicts: PE firm may overvalue illiquid assets to improve insurer balance sheet appearance
- Risk transfer: PE firm may offload riskier assets to affiliated insurer, socializing risk with policyholders while privatizing gains
Regulatory response: State insurance departments increasingly scrutinize related-party transactions, requiring arm's-length pricing, independent valuations, and documentation that transactions benefit policyholders.
Complexity and Transparency
Opaque structures: Private credit, structured products, and alternative investments lack the transparency of publicly traded bonds. Valuation relies on models and estimates, not market prices.
Regulatory challenge: Supervisors struggle to assess risks in complex portfolios, potentially missing emerging problems until they materialize as losses.
Policyholder understanding: Consumers buying annuities or life insurance from PE-owned insurers may not understand or appreciate the investment strategies backing their policies.
Policyholder vs. Shareholder Interests
PE firms maximize shareholder returns: Private equity's mandate is generating returns for fund investors—often requiring aggressive strategies and financial engineering.
Policyholders need safety and stability: Life insurance and annuities are long-term financial security products. Policyholders prioritize safety over maximizing returns.
Tension: PE ownership can create tension between maximizing investment returns (shareholder interest) and maintaining conservative risk posture (policyholder interest).
Regulatory role: Insurance commissioners must balance encouraging innovation/competition with protecting policyholders from excessive risk-taking.
Regulatory Response and Oversight
State Insurance Department Scrutiny
Enhanced supervision: Many state insurance departments have created special units or enhanced oversight protocols for PE-owned insurers.
Focus areas:
- Investment portfolio review: Analyzing asset quality, liquidity, concentrations, and valuation methodologies
- Related-party transaction approval: Requiring pre-approval for investments in parent PE firm-originated assets
- Capital adequacy: Ensuring PE-owned insurers maintain sufficient capital despite aggressive investment strategies
- Governance: Evaluating board independence and management's prioritization of policyholder interests
New York DFS Cybersecurity Regulation: New York's Department of Financial Services has been particularly aggressive in overseeing PE-owned insurers, requiring detailed reporting and imposing restrictions on certain investment types.
NAIC Model Regulation Development
National Association of Insurance Commissioners (NAIC) develops model regulations for states to adopt:
Private equity focus: NAIC created working groups studying PE involvement in insurance, examining risks, and proposing enhanced regulatory frameworks.
Potential reforms:
- Limits on illiquid asset concentrations
- Enhanced disclosures of related-party transactions
- Stress testing requirements for liquidity crises
- Minimum liquidity buffer requirements
Implementation challenges: Insurance regulation is state-based (not federal), so reforms require adoption by individual states—creating potential for regulatory arbitrage (PE-owned insurers domiciling in states with lighter regulation).
Federal Oversight Gaps
No federal insurance regulator: Unlike banks (FDIC, OCC, Federal Reserve), insurance is regulated exclusively by states, creating fragmentation and inconsistency.
FIO monitoring: The Federal Insurance Office (within U.S. Treasury) monitors insurance industry developments but has no regulatory authority. FIO has flagged PE involvement as area of concern in recent reports.
Potential for federal action: If state regulation is deemed insufficient or systemic risks emerge, Congress could intervene with federal insurance regulation—though this remains politically unlikely absent crisis.
What This Means for Consumers
Buying Annuities from PE-Owned Insurers
Competitive rates: PE-owned insurers often offer among the highest annuity crediting rates, making them attractive to consumers seeking maximum guaranteed income or growth.
Financial strength considerations: Before purchasing, verify insurer's financial strength ratings:
- A.M. Best: A or better
- S&P Global: AA or better
- Moody's: A or better
Check parent company: Research PE parent firm's reputation, track record, and financial stability. Established PE firms (Apollo, Blackstone, KKR) have strong brands and capital resources. Lesser-known firms may warrant additional scrutiny.
State guaranty fund protection: All states have insurance guaranty associations that protect policyholders if insurers fail. Limits vary by state but typically cover $250,000-$500,000 per policy. This provides a safety net regardless of insurer ownership.
Risk assessment: PE-owned insurers' aggressive investment strategies carry higher risk but also potential for higher returns. Conservative consumers may prefer traditional insurers; yield-focused consumers may accept PE-owned insurer risks for better rates.
Buying Life Insurance from PE-Owned Insurers
Similar considerations apply to life insurance:
Competitive premiums: PE-owned insurers may offer lower premiums for term life or better cash value accumulation for whole/universal life.
Long-term obligations: Life insurance policies last decades. Ensuring insurer stability over 20-30+ years requires confidence in investment strategy sustainability and PE ownership commitment to the insurance business (will they sell the insurer? exit insurance entirely?).
Beneficiary protection: State guaranty funds provide limited protection (typically $300,000-$500,000 death benefit coverage per policy), so very large policies ($1M+) face exposure if insurer fails.
Diversification Across Insurers
Don't concentrate all coverage with one PE-owned insurer: If you own multiple annuities or large life insurance policies, consider spreading across multiple insurers (ideally including traditional mutual insurers) to diversify risk.
Example: $1 million in annuities divided across three insurers ($333K each) vs. all $1M with one insurer. If one fails, you're partially protected; if all with one insurer, you face concentrated risk.
The Future of PE in Life Insurance
Continued Growth Expected
PE's role will expand: As long as PE firms generate superior investment returns and traditional insurers struggle with low yields, PE involvement grows.
New entrants: Additional PE firms will launch or acquire insurers, and existing PE-owned insurers will continue growing market share through competitive pricing.
Product innovation: PE-owned insurers will introduce new product structures, distribution models, and technology platforms, continuing to push industry evolution.
Regulatory Evolution
Tighter oversight likely: As PE's industry footprint grows, regulatory scrutiny intensifies. Expect new rules on illiquid asset limits, related-party transactions, and capital requirements.
Federal involvement possible: If systemic risks emerge or state regulation proves inadequate, federal policymakers may intervene with new oversight frameworks.
Industry standards: Industry groups (NAIC, ACLI) will develop best practices for PE-owned insurers to promote sound risk management and maintain public confidence.
Market Dynamics
Traditional insurers adapting: Traditional mutual and stock insurers are adopting some PE strategies—increasing alternative investments, forming partnerships with PE firms, and innovating products to compete.
Bifurcation: The industry may bifurcate into conservative traditional insurers (lower returns, higher safety) and aggressive PE-owned insurers (higher returns, higher risk), with consumers choosing based on priorities.
M&A continues: PE firms will pursue additional acquisitions, particularly targeting inefficient traditional insurers, small regional carriers, and distressed blocks of business.
Key Takeaways
Private equity now controls or influences $849 billion in life insurance assets (14% of industry) and drives industry M&A, investment strategies, and product innovation.
PE-owned insurers achieve higher investment returns (6-7% vs. 4-5%) by allocating heavily to private credit, real estate, and alternative investments rather than traditional bonds.
Benefits include competitive pricing, innovation, and capital efficiency, making annuities and life insurance more attractive and accessible to consumers.
Risks include illiquidity, credit concentration, conflicts of interest, and potential tension between shareholder return maximization and policyholder safety.
Regulators are responding with enhanced oversight, examining investment portfolios, related-party transactions, and capital adequacy to protect policyholders.
Consumers should verify financial strength ratings, understand PE ownership implications, and consider diversifying coverage across multiple insurers to manage risk.
PE's role will continue growing, reshaping the life insurance and annuities industry for decades to come as traditional insurers adapt and regulatory frameworks evolve.
The private equity transformation of life insurance represents one of the most significant industry shifts in a generation. For consumers, the changes create both opportunities (better rates, more innovation) and risks (complex investments, aggressive strategies). Understanding the dynamics, evaluating insurers carefully, and making informed choices ensures you benefit from competition and innovation while managing exposure to elevated risks that accompany PE ownership.
Considering annuities or life insurance from PE-owned insurers? With complex investment strategies, evolving regulatory landscapes, and significant financial decisions at stake, professional guidance helps you evaluate options, assess risks, and choose coverage that aligns with your financial goals and risk tolerance. The PE transformation of insurance creates opportunities—but only for those who understand the landscape.
Sources: Gallagher, Global Finance Magazine, S&P Global, Chicago Fed, Moody's